WHICH CHAPTER OF BANKRUPTCY TO FILE? CHAPTER 7 OR CHAPTER 13 ?
In Southeast Missouri, there are about TWO Chapter 7 bankruptcies filed for every ONE Chapter 13 (2016 data).
Chapter 7 bankruptcies are popular because they allow individuals to:
– Get a FRESH START by eliminating their heavy debt burden without any repayment plan, and
– GET DONE QUICKLY. A Chapter 7 bankruptcy typically only takes about 4 months.
So why would someone choose a Chapter 13 over a Chapter 7? For these reasons.
Chapter 13 bankruptcy is popular if:
– You make too much money and aren’t eligible for Chapter 7. We do something called a “means test” to figure out if you qualify for Chapter 7.
– You want to keep your property. A chapter 13 can allow you to keep your property including real estate (your home) or a business. Generally, if you have valuable property not covered by your Missouri bankruptcy exemptions that you want to keep, a chapter 13 filing may be a better option.
For more on the two most popular types of bankruptcies read the following:
Missouri Chapter 7 Bankruptcy
Missouri Chapter 13 Bankruptcy
Here’s a quick overview of the advantages and disadvantages of Chapter 7 and Chapter 13 bankruptcy:
ADVANTAGES TO A MISSOURI CHAPTER 7 FILING:
1. Fresh Start. You receive a complete fresh start. After the bankruptcy is discharged the only debts you owe will be for secured assets on which you choose to sign a “Reaffirmation Agreement.”
2. Automatic Stay. You have immediate protection against creditor’s collection efforts and wage garnishment on the date of filing.
3. No minimum. There is no minimum amount of debt required.
4. Quick. Your case is often over and completely discharged in about 3-6 months.
5. Ability to Move On. Wages you earn and property you acquire (except for inheritances) after the bankruptcy filing date are yours, not the creditors or bankruptcy court.
DISADVANTAGES TO A MISSOURI CHAPTER 7 FILING:
1. You lose your non-exempt property which is sold by the trustee. If you want to keep a secured asset, such as a car or home, and it is not completely covered by your Missouri bankruptcy exemptions then Chapter 7 is not an option.
2. If facing foreclosure on your home, the automatic stay created by your Chapter 7 filing only serves as a temporary defense against foreclosure.
3. Co-signors of a loan can be stuck with your debt unless they also file for bankruptcy protection.
4. You can file a Chapter 7 bankruptcy once every 8 years.
ADVANTAGES TO A MISSOURI CHAPTER 13 PAYMENT PLAN:
1. Keep property. If you choose and you can afford the payment plan, you can keep all your property, exempt and non-exempt.
2. Debt reduced. While debts are not canceled as in a Chapter 7 discharge they can be reduced under a Chapter 13 payment plan.
3. Automatic Stay. You have immediate protection against creditor’s collection efforts and wage garnishment.
4. Protect co-signers. If the Chapter 13 plan provides for full payment, any co-signers are immune from the creditor’s efforts.
5. Stop Foreclosure. You have protection against foreclosure on your home by your lender as long as you meet the terms of the plan.
6. More Time to Pay Debts. You have more time to pay debts that can’t be discharged by either chapter (like taxes or back child support).
7. Can Refile Sooner. We hope you don’t need to, but just in case, it’s an option sooner.
DISADVANTAGES TO A MISSOURI CHAPTER 13 PAYMENT PLAN:
1. Payment Plan. You create a payment plan where you use your post-bankruptcy income. This ties up your cash over the Chapter 13 plan period.
2. Costs More. Legal fees are higher since a Chapter 13 filing is longer and more complex.
3. Takes Years. Your plan and therefore your debt will last for 3 to 5 years.